Like fathers like sons?: the cost of sovereign defaults in reduced credit to the private sector 1880-1913

Esteves, Rui
(2012)
Like fathers like sons?: the cost of sovereign defaults in reduced credit to the private sector 1880-1913.
In: Modern and comparative economic history seminar, 1st November 2012, London School of Economics and Political Science.
(Unpublished)

Full text not available from this repository.

Abstract

This paper investigates the impact of sovereign defaults on the ability of the corporate sector in
emerging nations to finance itself abroad. The hypothesis here is that defaults have a negative spillover
effect on the private sector through credit rationing. We explore a novel dataset covering the vast
majority of corporates and municipals in emerging nations that received foreign capital between 1880
and 1913. The detailed nature of the data allows us to explore variation between countries and
economic sectors. The results confirm that rationing existed, was very large, and persisted long
beyond the solution of the original default problem. Therefore, the private sector in emerging countries
paid a severe reputational cost for the debt intolerance of their governments, with possible
implications for the growth prospects of these nations.